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More than ?1 billion has been paid out in tuition fee loans for students studying at unregistered franchised providers over the past three years, new government data shows.

Answering a parliamentary question in the House of Lords, skills minister Jacqui Smith said that a total of ?1.9 billion has been paid out by Student Finance England between the 2021-22 and 2023-24 academic years on behalf of students taking a franchised course in England, with 59 per cent going to providers not registered with the Office for Students (OfS).

She stressed that it was not known what proportion of the fees?is retained by the lead provider ¨C meaning not all the money had gone directly to the franchised providers.

The number of students taking out these loans has increased by 58 per cent over the past three years, from 65,360 in 2021-22 to 103,350 in 2023-24.

The number of those enrolled and accessing loans with unregistered providers continuously outstrips those at registered providers. Currently, franchised providers do not have to be registered with the OfS, but students can still access loans via the lead provider university.

More than half of the 341 franchised providers identified in 2022-23 were unregistered, the government said earlier this year, as it introduced plans that will require franchised higher education providers with more than 300 students on their books to register with the English sector regulator.

Franchise providers have faced increased scrutiny in recent months as further evidence of fraud in the sector has emerged, with faux students accused of enrolling in degree programmes purely to access maintenance loan payments and not actually attending classes.

Education minister Bridget Phillipson has pledged to introduce new legislation to regulate the sector, although it is unclear what this will look like. Writing in The Sunday Times in March, she described the situation as ¡°one of the biggest financial scandals in the history of our universities sector¡±.

Last week, Phillipson terminated access to student loans for a franchised provider, Oxford Business College, saying it had fallen ¡°well short¡± of recruitment and attendance standards, including doubts that students¡¯ English language competence had been ¡°adequately assessed¡± and their attendance monitored.

The college, which has five colleges in England, said it would be challenging the decision.

helen.packer@timeshighereducation.com